Cash rate will not increase, despite growth in property prices

The Reserve Bank of Australia (RBA) remains firm to their cash rate promises during October’s monetary policy meeting with no plans on lifting the 0.1% rate until 2024.

Whilst an increase in cash rate would lead to better housing affordability, it would also mean poor wage growth and fewer jobs, said RBA Governor Philip Lowe. Instead, Dr Lowe suggested that housing affordability should be tackled at a government policy level.

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Effect of restrictions on the market

The biggest issue from the lockdowns was a decrease in auction clearance rates as buyers and sellers withdraw from the market. Disruptions to property inspections also considerably impacted market, since not many people buy a home sight-unseen, according to Domain.com.au’s Chief of Economic Research Nicole Powell,

Despite this, property prices (especially in Sydney and Melbourne) continue to grow. Data from ABS revealed that the average house price has risen to $835,700, roughly $50,000 from last quarter.

Property market forecast and how lenders are reacting

Experts predict a busy selling period ahead due to pent up buying and selling activity from restrictions. With restrictions easing, Head of Research at CoreLogic Tim Lawless said that we should see an increase in confidence from vendors thinking of selling their property”.

Lenders are also keeping rates low for home loans, with record number of mortgage holders take advantage by refinancing and locking into fixed rate mortgages. However, lenders are shifting their sights to variable rates to entice more borrowers to refinance, according to Ratecity.com.au’s Research Director Sally Tindall.

Although number of refinances remains high, first home buyer loans are decreasing according to Australian Bureau of Statistics. This is due to investors returning to the market and house prices continuing to rise.

The next RBA decision will be announced...

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How can I keep my interest rate low? 

Whilst borrowers don’t have control of market movements, there are a few ways to keep rates low: 

  • Organise refinancing or pre-approval while rates are still low to strengthen any potential home loan savings.
  • Stay on top of your fixed-term’s end date and be on the lookout for low rates as it approaches.
  • Loyalty doesn’t pay! Shop around and compare multiple home loan products for the best chance of securing a low rate.

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